How to Determine KPIs That Align with Business Goals
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February 13, 2025
February 13, 2025
Do you want to improve how you set key performance indicators (KPIs)?
Start by asking: What problem are we trying to solve—and what does success look like?
Many leaders fall into the trap of measuring what’s easy rather than what matters when setting KPIs. The Alignment Conversation Toolkit from i4cp and the ROI Institute provides a straightforward framework to ensure KPIs drive meaningful results.
The Five Levels of Alignment
To define effective KPIs, you need to work through these five interconnected levels:
| Level | Focus | Example KPI |
|---|---|---|
| Level 5: Payoff | Identify the economic or reputational value of solving a problem or seizing an opportunity. | Reduce waste disposal costs by 20% in 12 months. |
| Level 4: Business | Tie KPIs to measurable business outcomes like cost, quality, or customer satisfaction. | Decrease employee turnover in critical roles by 15%. |
| Level 3: Performance | Define the behaviors or processes that need to change to improve business outcomes. | Increase manager-employee feedback sessions by 25%. |
| Level 2: Learning | Identify the knowledge or skills employees need to address performance gaps. | Achieve 90% completion of supervisor training programs. |
| Level 1: Preference | Determine the most effective methods for delivering knowledge and tools to enable change. | Track the adoption rate of job aids introduced in workshops. |
A Practical Approach to KPI Setting
Use a structured conversation to clarify alignment at each level. For instance:
- If addressing absenteeism, ask: What’s the cost of absenteeism to the business? What behaviors need to change to reduce it?
- Quantify the opportunity: A 10% reduction in absenteeism could save $58,320 annually.
- Define the KPI: “Reduce absenteeism by 10% in 12 months.”
The complete Alignment Conversation Toolkit provides additional tools and resources to make your KPI-setting process more comprehensive and actionable. It includes:
- Sample Questions: Use with business stakeholders to help ensure that HR solutions are business-aligned.
- Sample Worksheet: An easy-to-paste example to guide your conversations and ensure alignment with business needs.
- If-Then Table: Step-by-step guidance for asking the right questions based on the information you already have.
- Sample Business Case: A real-world example of alignment leading to measurable outcomes.
- Conversation Framework: A script and approach for handling scenarios of proposed solutions without clear alignment to business goals.
